Curbs on e-auction of coal have helped no one so far

It took almost 10 years for Coal India unit Central Coalfields to begin production at its Amrapali mine in Jharkhand. But when it did in July, it was only because the new BJP Government at the Centre — facing a power crisis — fastracked its opening.

But four months down the line, the mine has developed a pit-head stock of nearly 1.5 million tonnes, or one-fourth the total production so far, because of poor rail infrastructure. This stock could have been sold in the open market, but the curb on e-auction sales prevents the company from exploring the option.

Amrapali is not an exception. After reducing the pit-head stock from 71 mt to nearly 49 mt over the past two years, CIL is now accumulating inventory at great speed in 2014-15, due to restrictions imposed on spot sales by Coal and Power Minister Piyush Goyal in July.

Faced with the country’s bleak power situation, Goyal had ordered reducing e-auction sales to half at around 25 mt in the hope that it would lead to more fuel for electricity generation units.

As a result, CIL sold a mere 3.3 mt coal through this route in July-September, as against 12.79 mt in the same period last year, leading to supply crunch and price surge in the open market. The decision cost CIL profit opportunities. The steel and cement sector, that would have got the coal through e-auction route, stepped up imports. But the power sector did not benefit either.

CIL has produced nearly 18 million tonnes more fuel so far this fiscal, which is 6 mt higher than total incremental production (12 mt) in the last fiscal. But about 11 mt of additional production is rotting on pit-head.

And since coal catches fire if left in the open, the value of such inventory will be degraded over time.

The irony can be understood from the mismatch in production and off-take growth. While production grew by over 7 per cent, off-take increased only by 4 per cent. And unless there is a dramatic improvement in evacuation, CIL is all set add to its inventories this year.

Ranchi-based CCL, Sambalpur-based Mahanadi Coalfields and Bilaspur-based South Eastern Coalfields are among the most affected.

For SECL, the ban on spot sales comes at a time when it solved some major tangles in land acquisition to push up production from opencast mines at Gevra (40 mt), Dipka (30 mt) and Kushmunda (22 mt) by 12-14 mt a year.

As things stand, these three mines are extracting four lakh tonne of fuel every day and nearly 20-25 per cent of it is being added to inventory.

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